Hotel and leisure club operator, De Vere Group, saw its pre-tax profits for the half year to 30 March slump 78.4 per cent on the same period in 2002 after a one-off £9.3m VAT charge.

The payment relates to leisure and golf subscription income which had been treated as exempt sales between 1997-1999 inclusive.Group turnover for the period was up 7.2 per cent from £140.1m at the same time last year to £150.2m. EBITDA rose 1.7 per cent from £34.1m to £34.7m but operating profit was flat at £22.7m, compared with £22.8m in 2002.

Excluding the VAT charge, pre-tax profits fell 5.4 per cent from £15.9m to £15m. Otherwise, profit before tax was £3.6m, against £16.5m in 2002.Amongst the divisions, De Vere Hotels saw turnover up 2.5 per cent to £86.2m but EBITDA down 6.9 per cent to £20.6m.

The sector - which operated 21 hotels with 3,299 rooms and had 24,200 leisure members at the end of the period - saw good progress in the first quarter, especially in the conference market, but this was reversed in the second quarter, with concerns about the economy and the war in Iraq affecting trading.Turnover at Village Hotels & Leisure Clubs rose 15.1 per cent to £36.5m and EBITDA was up 10.2 per cent to £9.8m. As at 30 March, the sector comprised 14 hotels with 1,243 rooms and like for like occupancy increased by 0.7 per cent to 79.3 per cent. This compares with the rest of the mid-provincial market figure of 62 per cent.

Leisure club members at the group numbered 58,200, an increase on the previous year of 11.1 per cent.Two new Village Hotels sites are under construction this year, at Maidstone and North Birmingham, with two more, Bournemouth and South Birmingham, due to start in 2004.

Turnover at Greens Health & Fitness was up 37.7 per cent to £14.9m, with EBITDA climbing 56.1 per cent to £3.3m. Total membership is now 63,700, a 30.5 per cent increase during the last 12 months.The opening of a club in Giffnock, South Glasgow, in December brought the number of Greens clubs to 15.

At G&J Greenall, turnover fell 6.7 per cent to £12.6m but operating profit increased by 2.4 per cent to £0.6m.Group chairman, Peter Daresbury, said: These are very positive results in what continues to be difficult trading conditions in the hotel industry.

Since the end of the half year, trading conditions have remained challenging, although - given the general economic climate - in line with the board's expectations. Group sales have increased by 3.4 per cent over the period, although the timing of Easter adversely affected performance.Looking ahead, Daresbury commented: Whilst the economic outlook remains uncertain and the timing and extent of any recovery are hard to predict, the board is confident that its brands will continue to perform well in a tough market.

Elsewhere within the De Vere group, chief executive, Paul Dermody, will have served 40 years with the company in October this year and the board is seeking a successor to the post. Dermody will continue in the role until the position has been filled and a handover taken place. Details: www.devereonline.co.uk